On July 2, the Pagosa Springs Town Council approved a 30-year lease with La Plata Electric Association (LPEA) for the usage of 5.18 acres on town-owned property on Trujillo Road for the purpose of a new LPEA substation.
The move comes after the council tabled a decision on whether to lease or sell the section of property to LPEA at its previous meeting.
The property is located at 2140 County Road 500 and is the location of the Archuleta County-run transfer station and recycling center.
The town currently leases the property to the county for its operation of the transfer station, but town staff recently learned that the county “is planning on moving the transfer station to another location, likely within the next year,” states an agenda document on the matter.
The section of the property that LPEA would utilize as its substation is “an unused portion” of the town-owned property, according to the document.
“Town council decided to continue this discussion to today’s date, and staff is prepared to share a little bit more information, whether you decide to go into executive session or you just want to do it in open session,” Community Development Director James Dickhoff said.
Dickhoff explained that he had done some “additional calculations” since the last meeting and that “we have an appraisal” of the property “in hand, which gives us generally what a purchase price would be, and I also did a little bit more analysis on the lease option.”
The council decided to remain in open session to discuss the matter.
Dickhoff explained that the appraisal of the property was done for “the original 4.25 acres” and that, since then, LPEA increased the size needed for the substation to 5.18 acres.
The appraisal of the property adjusted to the larger size requested by LPEA “equates to $135,384 for the value of the 5.18 acres,” he explained.
He then walked the council through some projected annual lease amounts, with a couple of different interest rates, and the revenue that the town would generate over a 30-year period, “basing it totally on a 30-year mortgage.”
He noted that he understood that there was general support amongst the council for LPEA putting its substation on the property, but he was seeking guidance from the council on how it wanted to convey the property, either in the form of a lease or a sale.
Any final decision by the council would also “have to go in front of” the LPEA board “for their consideration, and there may be some back-and-forth,” he explained.
Town Manager David Harris chimed in to say, “One crazy thought we had after our last meeting was that we have an asset here that we could actually have a long-term funding source for future projects.”
Harris explained that he had planned on presenting to the council the idea of starting a community infrastructure and economic development fund during budget season.
“We would be looking for a funding source for this … and one funding source for this would be the property, if we were to lease it,” he added.
Dickhoff explained that for a long-term lease, such as a 30-year lease, the council would need to bring the issue back in the form of an ordinance.
He added that his conversations with LPEA’s staff gave him the impression that the LPEA board would only be amenable to a lease if it is comparable to what a 30-year mortgage would be for the property.
Council member Leonard Martinez noted that he was one of the members “opposed to the lease” at the last meeting, but that he was being persuaded by Harris’ suggestion about a revenue stream to support community infrastructure and economic development.
“That would be, for me, an indication that we are setting money aside in a way that would say, ‘Hey, listen … let’s use some of this.’ ... That opened the door for me. If we do something like that, then I’m in favor of the lease,” Martinez said.
“I’m still of the opinion that we should just sell it. It’s got a nice view, but it’s next to an abandoned landfill and a current transfer waste station,” council member Matt DeGuise said, adding that he thought LPEA would prefer to purchase the parcel.
Agreeing with DeGuise, council member Madeline Bergon suggested that selling the property is the “cleanest approach,” adding that she doesn’t see many possible uses or benefits from the property in the future.
“I’m still in favor of leasing,” Council member Gary Williams said. “I think it’s a good deal for LPEA to lease it, and I think that it needs to be a longer-term lease to make it economically viable for them.”
Williams asked if LPEA has discussed the length of lease that they would prefer.
Dickhoff replied that a “30-year would likely end up in a lease-to-own-type scenario.”
“A 30-year lease would be a lease to own, a lease to purchase, so after 30 years, they’d be the owners of that property, because a substation has at minimum a 30-year lifespan … but we can structure it any way you want,” Dickhoff said.
Williams expressed that he was confused by the lease-to-purchase idea.
Dickhoff explained that the town would lease it for 30 years and, at the end of that term, LPEA would own the property.
Williams suggested he favors leasing it for 30 years, but that at the end of the lease agreement the town should maintain ownership.
“That’s why I’m in favor of a shorter lease,” council member Brooks Lindner said.
DeGuise replied to Lindner that a substation is a long-term piece of infrastructure, and that LPEA couldn’t “just pack it up and move it” if the town decided not to renew a shorter lease.
Williams expressed that he wants to ensure that the town maintains access to the rest of the property, but Dickhoff explained that, other than the 5.18 acres that would be used by LPEA, there really wasn’t much usable ground left, describing it as “a steep hill.”
Lindner noted that he wanted to hear from the “pro lease” members about their strongest argument in favor of leasing the land.
Williams replied that it is in total a 21-acre parcel, and “some of it is very attractive … some of it is meadowland that we could use as a solar garden or whatever — you know, a community solar project. … In the future it will be nice to have 21 acres back for the council to consider what to do with.”
Council member Mat deGraaf suggested he is “pro lease” because “we don’t know what the future holds and it’s our property now.”
He said that he understands that the substation is a near-permanent piece of infrastructure and that “if I was LPEA, I’d probably prefer to own it. … I’m not opposed to a sale, but I think we should explore keeping that which we already own.”
Martinez reiterated that he favors the lease idea because he likes the idea of a revenue stream to support community infrastructure and economic development.
Mayor Shari Pierce chimed in to say that she favors a lease with a lower interest rate to “be good community partners” with LPEA, but that she also favors maintaining town ownership at the end of the lease term, citing rising property values.
“It would provide a revenue stream for the town, which, right now, we are so dependent on sales tax, and this is a small revenue stream, but we have to start diversifying. So, I think we can be good community partners … but still do a lease,” Pierce said.
DeGuise replied that he thought LPEA would not enter into the lease unless it became the owner of the parcel at the end of the term, and, in this case, the town would receive no revenue stream.
Pierce suggested that would be its choice and in its hands, and the town could revisit and reconsider if LPEA turned down the lease offer.
“Their board may come back with a counter offer,” she said.
A motion was then made to direct the town manager to negotiate a lease with LPEA for 30 years at an interest rate of 5 percent and with the funds generated to be earmarked for future investment and economic development as a starting point for the negotiations.
A roll call vote showed Pierce, Williams, deGraaf and Lindner in favor of the motion, with DeGuise and Bergon opposed. The motion carried.
In an email, Town Clerk April Hessman explains that the lease would generate $8,700 per year for the town if approved.
derek@pagosasun.com
